After Hurricane Maria, many policyholders in Puerto Rico received payments for the damages caused by the hurricane, and due to the need for repairs to their property, they immediately deposited the checks. The problem with depositing these checks was many included the words “final” or “the endorsement of this check constitutes a total and definitive payment” and without any further explanation, these were mailed and handed to the policyholders. When a policyholder is not satisfied and considers that a property claim is being underpaid, he/she must notify the carrier and ask the consequences of signing and depositing the check.
This was the case of many policyholders in Puerto Rico that deposited the checks issued by the carriers unaware of the adverse effects it could have on their rights and possible remedies. Now, many of the carriers are arguing in court and filing Motions for Dismissals due to Accord and Satisfaction. The Supreme Court of Puerto Rico has held that the following elements are required for Accord and Satisfaction to exist:1
- A claim must be illiquid or a bonafide controversy must exist.
- Debtor makes a payment offer.
- Creditor accepts payment offer.
The Supreme Court of Puerto Rico has also held that a creditor that accepts money with clear understanding that it represents a proposal to extinguish the obligation cannot detract the payment agreement or the endorsement of the check by phrasing at your liking.2 The court also held that a contract of payment and agreement is parallel to a transaction which is accessory, consensual, bilateral, and onerous.3
If a creditor accepts payment from the carrier with the condition and understanding that the balance of the claim will be paid off, the creditor has the duty to return the amount offered back to the debtor if he/ she does not agree with the condition.4 The creditor cannot take advantage of the payment offer and after accepting it then, claim a remaining balance. In addition, a creditor cannot retain or return a check that accepts from the carrier with an indicative annotation that the payment is offered as total or to pay off balance after he/ she deleted or wrote over the words that stated that accepting and endorsing the check with clear understanding represents the extinction of the debt.5
Before endorsing and depositing a check issued by an insurance company, it is important that a policyholder be aware of what the check represents. For example, if it is a partial or final payment and if they agree or not with the amount paid. In some cases, an insurance claim can be dismissed if the policyholder had a clear understanding of the effects of accepting, endorsing, and depositing a payment.
1 H.R. Elec., Inc v. Rodriguez et. al, 114 D.P.R. 236, (1983).
2 A. Martinez & Co. v. Long Const. Co., 101 D.P.R. 830 (1973).
3 A. Martinez & Co. v. Long Const. Co., supra.
4 Lopez v. South P.R. Sugar Co., 62 D.P.R. 238, (1943).
5 A. Martinez & Co. v. Long Const. Co., supra.